Here we go again…..

Those who do not learn history (WaPo, h/t Corner)…

The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.

President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.

“Much-celebrated housing recovery”? Anyone else miss the “much-celebrated housing recovery”?

Granted, the loosening of mortgage restrictions was far form the only problem that led to the Panic of 2008. I would even argue that it was far less important than the idiotic mark-to-market rule on mortgage-backed securities. Still, the president’s determination to reflate the housing bubble is stunning.

Cross-posted to RWL

It really is Bush’s fault, Part 1: the temporary tax cuts

The 2012 election has led, in theory, to a large amount of “soul-searching” in the Republican Party. However, one datum from the electorate that has largely been unaddressed is the fact that a majority of voters still blamed former President George W. Bush for the current state of the economy than his successor. After a review of the economic situation over the last dozen years, I have come to the conclusion that the majority is correct, although my reasons for it are likely not theirs. This series will cover how I believe the former President earned the blame. I should note that I will only deal with economic policy here.

First and foremost, it is now clear that Bush the Younger’s strategy for reducing taxes in 2001 and 2003 – bigger, but time-limited, over smaller and permanent – was a mistake.

For much of the last four decades, argument over economics have been between Keynesians – those who believe aggregate demand for economic output (consumption, business purchases, and government spending) is the dominant force in the American economy – and, for lack of a better term, anti-Keynesians – who recognize numerous other factors, most affecting production. Monetarists focus on the dangers of uncertainty, the Rational Expectations school zeroes in on reactions and expectations of consumers and businesses, and Supply-siders emphasize the costs to businesses caused by government (taxes and regulations in particular).

The fact of the matter is this: from an anti-Keynesian perspective – any anti-Keynesian perspective – temporary tax cuts are a disaster. They add uncertainty, fuel expectations of a future tax increases (once the reductions expire), and do little to the long-run costs businesses must endure to operate and expand – and in fact can add unproductive costs for time-phased tax avoidance. This is why the last temporary tax policy of any kind prior to 2001 was imposed during the 1970s, before anti-Keynesianism grew into the umbrella of ideas that it has become.

As a result, Bush the Younger’s tax reductions were drained of any supply-side effects, and were simply much larger versions of Keynesian temporary tax cuts from earlier times. The result was as expected – an inflationary expansion fueled by higher prices in resources (including land – hence the housing bubble) and vast increases in consumer debt to pay for it all.

Looking back, it would have been better to reach out to the Democrats to see if they would accept smaller, but permanent, tax reductions. Instead, we now have reductions about to expire, and massive budget deficits fueled in no small part on the possibility of those very tax cuts expiring (and thus recovering large amounts of revenue).

In short, we got the disadvantages of higher tax rates (on the economy, and on the impulse of Washington to spend) without that actual revenue from them: literally the worst of all worlds.

Looking forward, it is all but certain that the Republicans currently in Washington will cave on the president’s demand for higher tax rates. I would prefer that they didn’t – in fact, I find any kind of tax increases to be a bad idea – but to some extent this was inevitable the moment Bush the Younger and the Republicans in Congress decided to make the 2001 and 2003 tax cuts temporary rather than spend the political capital needed to make them permanent and/or find accommodation with the Democrats for a smaller yet permanent reduction.

A Republican Party that so thoroughly lacks the courage of its convictions is in need of a far deeper overhaul than anyone is considering right now – or simple replacement.

Cross-posted to the right-wing liberal

Dow Hits 8,000 No Thanks To Obama

If The Teleprompted One was truly smart or if he had surrounded himself with smart people instead of incompetents like Tim Geithner, then SOMEONE would have pushed to have this happen a long time ago.  D.J. McGuire has been calling for months for the “mark-to-market” rules to be eased.  Heck, we were even backing this idea here at Virtucon way back on Oct. 1, 2008, so the economic incompetence spans two administrations.  (Come on, my ol’ bud Austan Goolsbee, you’re the economist.  This is the first thing you should have done.  How is it that I was six months ahead of this and you’re still silent on it?)

Note that ultimately it was the private sector’s Financial Accounting Standards Board that made these accounting rule changes.  With this change, the toxic bank assets can have their true economic value placed uopn them, which is much greater than what they are forced to be valued at presently.  As a result, the Dow Jones Industrial Average has cracked 8,000 for the first time in months.

Perhaps the Board was just waiting for The Teleprompted One to leave the country so he couldn’t try to steal the credit for it.

This is how it begins…

From Larry Kudlow regarding Rick Santelli’s “Rant Heard Round The World”:

Santelli said: “Government is promoting bad behavior. . . . Do we really want to subsidize the losers’ mortgages? This is America! How many of you people want to pay for your neighbor’s mortgage? President Obama, are you listening? How about we all stop paying our mortgages! It’s a moral hazard.”

All this took place on the air, to the cheers of traders. Santelli called for a new tea party in support of capitalism. He’s right.

Kudlow is right to a large degree.  But this won’t stop at a tea party.  When the government expects the 91 percent who play by the rules to bail out the 9 percent who were fools and when that same government tries to give us leaders who owe the IRS back taxes in amounts that many people who dutifully pay their taxes in full and on time only dream of having as an annual salary, America is closing in on the tipping point when the producers will begin to “shrug.”

How long until we start seeing “WHO IS JOHN GALT?” flyers taped up around cities and towns across America?  Not long I’ll wager.

Russia Sees U.S.A. Going The Way Of The Soviet Union

From Drudge Report:

RUSSIAN ANALYST PREDICTS DECLINE AND BREAKUP OF USA
Tue Nov 25 2008 09:04:22 ET

A leading Russian political analyst has said the economic turmoil in the United States has confirmed his long-held view that the country is heading for collapse, and will divide into separate parts.

Professor Igor Panarin said in an interview with the respected daily IZVESTIA published on Monday: “The dollar is not secured by anything. The country’s foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse.”

The paper said Panarin’s dire predictions for the U.S. economy, initially made at an international conference in Australia 10 years ago at a time when the economy appeared strong, have been given more credence by this year’s events.

When asked when the U.S. economy would collapse, Panarin said: “It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world’s financial regulator.”

When asked who would replace the U.S. in regulating world markets, he said: “Two countries could assume this role: China, with its vast reserves, and Russia, which could play the role of a regulator in Eurasia.”

Asked why he expected the U.S. to break up into separate parts, he said: “A whole range of reasons. Firstly, the financial problems in the U.S. will get worse. Millions of citizens there have lost their savings. Prices and unemployment are on the rise. General Motors and Ford are on the verge of collapse, and this means that whole cities will be left without work. Governors are already insistently demanding money from the federal center. Dissatisfaction is growing, and at the moment it is only being held back by the elections and the hope that Obama can work miracles. But by spring, it will be clear that there are no miracles.”

He also cited the “vulnerable political setup”, “lack of unified national laws”, and “divisions among the elite, which have become clear in these crisis conditions.”

He predicted that the U.S. will break up into six parts – the Pacific coast, with its growing Chinese population; the South, with its Hispanics; Texas, where independence movements are on the rise; the Atlantic coast, with its distinct and separate mentality; five of the poorer central states with their large Native American populations; and the northern states, where the influence from Canada is strong.

He even suggested that “we could claim Alaska – it was only granted on lease, after all.” Panarin, 60, is a professor at the Diplomatic Academy of the Russian Ministry of Foreign Affairs, and has authored several books on information warfare.

Developing…

WashPo Gets It On Financial Failure

Today’s WashPo editorial on the financial crisis is spot on.  Free Market Capitalism did NOT fail us.  Rather, it was government intrusion into the markets that created this mess.

Government-sponsored, upside-only capitalism is the kind that’s in crisis today, and we say: Good riddance.

I will echo that sentiment as well. What happens next is even more important, though. Will we reign in the government and allow free markets to actually work or will we move in the opposite direction of government “spreading the wealth around” as Barry Obama suggests and become increasingly more socialistic? That is the choice that America faces on Nov. 4. If voters opt for the latter, then we have only seen the beginning of our economic troubles.

Bill Day — Against The Bailout Until Wittman Was Against It, Then Day Was For It

And the entertainment from Bill “The Crush Puppy” Day just keeps on coming:

9/24/08

“I’m totally against it. I haven’t met anybody yet who’s for it. I’ve talked to hundreds of people. They’re all saying, ‘Why are we bailing out a company that couldn’t make it? Why do we have to bail out a company that made a huge mistake?’ That’s 100 percent of the people that I talk to. It’s another huge burden on the taxpayers.”

http://www.dailypress.com/news/local/dp-local_bailout_0924sep24,0,2959646.story

9/30/08

Democrat Bill Day, who is running against Wittman, offered a more nuanced view.

“I’m not in favor of bailing anything out,” he said. “If we’re talking about buying assets and protecting taxpayers, that’s something I would consider. The first step is we need to appraise the assets … before we just go out and write a check.”

http://www.dailypress.com/news/dp-local_politics_0930sep30,0,4551918.story

10/3/08

Day said. “We need to approve this thing on its own merit. Not with the sweeteners.”

http://fredericksburg.com/News/FLS/2008/102008/10032008/415489

10/4/08

Day said Thursday he probably would have voted for the original bill. “At that point, It wasn’t a bailout. It was a working out.” He said.

VA Gazette

10/8/08
Bill Day, the Fauquier County Democrat running against Wittman, put out a press release yesterday attacking Wittman for his “no” vote on the bill.

Day did say last week that he was beginning to hear from district residents as he campaigned that, “We need to move on this.”

http://fredericksburg.com/News/FLS/2008/102008/10082008/416232

The Video NBC Doesn’t Want You To See — SNL Gets To The Bottom Of Mortgage Crisis

This SNL skit is actually pretty darn accurate in explaining what really happened.

By the way, Herbert and Marion Sandler are real people. They built Golden West Financial into a subprime giant and then sold it to Wachovia for $24 billion. They walked away with billions of dollars for themselves. They’re also large donors to MoveOn.org and ACORN and have a close relationship with George Soros.

Mysteriously, the above video vanished from the NBC website.  Then again, there could be very good reasons why some people don’t want you to watch it.

UPDATE:  The unedited YouTube clip above has been removed and NBC has now put up an edited version of the skit deleting some of the items about the Sandlers.

However, you can still see the original skit in all its glory here.

Barney Franks Thinks You’re Racist If You Blame People For Buying Homes They Couldn’t Afford

Oh, now we can’t place blame where blame is obviously due.

Rep. Barney Frank said Monday that Republican criticism of Democrats over the nation’s housing crisis is a veiled attack on the poor that’s racially motivated.

Helloooooo…  If you are “poor” and you got a 100% home loan with no downpayment and then you defaulted on it because you didn’t have the money to pay your mortgage, I’d say you bear a pretty big share of the blame, at least for you own situation.  The others deserving of blame are the Democrats who made it possible for people to get home loans who couldn’t afford them because it was more important to get people into houses than to make sure they could actually pay for them.